HMRC quashes rumours of tax change for landlords who sell

Speculation that the government was attempting to ‘slip in’ yet more changes to the way landlords are being taxed have been dismissed by HMRC.

There had been a fear - fuelled by some comments by analysts - that amendments to the Finance Bill suggested the government wanted landlords who sell their investment properties to be subject to income tax ratherr than capital gains tax. 

The Bill reaches its Report Stage in parliament this week.

However, discussions between the National Landlords Association and HMRC have clarified the position, thanks to this statement from the Revenue:

“HMRC considers that generally property investors that buy properties to let out to generate property income and some years later sell the properties will be subject to capital gains on their disposals rather than being charged to income on the disposal.

“The exception, that is the reason why it says generally above, is that:

“If the investor decides to undertake development prior to sale the profit on the developed part, from the date the decision to develop for sale, will be trading income. But that would be trading income without the new legislation; 

“Or if the investor sells the land in a contract with a ‘slice of the action’ clause (allowing them to benefit from changes in the future development of the property) the slice of the action profit will be taxed under the new legislation - but it was previously taxed under the transactions in land legislation.”

Further guidance on the issue is likely to be released by HMRC in the near future.